- What should your DC default be?
- Number of pages
- Amsterdam: Faculteit Economie en Bedrijfskunde
- Document type
- Working paper
- Faculty of Economics and Business (FEB)
- Amsterdam School of Economics Research Institute (ASE-RI)
As reported, most DC pension scheme participants simply follow proposed defaults,
even though they have the freedom to choose. Consequently, default designs have
dramatic impacts on individuals’retirement saving outcomes. Given the fact that the
default design matters, this paper evaluates contribution default designs to help DC
plan participants to save and invest wisely. The proposed defaults can be characterized
by simple age-dependent contribution and investment rules, which may provide large
welfare gain above the current fixed default design. Furthermore, we …nd that the
optimal contribution choice plays a more important role in improving welfare than
optimal portfolio choice.
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